Bank of America analysts are waving a cautionary flag in the structured credit market, according to reporting by Bloomberg.

Bloomberg’s Christopher DeReza writes that a new note from BofA’s credit analysts warn investors that structured credit products are shifting into a “risk-off” phase as a market indicators suggest that some caution is justified.

From the article:

“We turn more defensive on securitized products and underweight on agency” mortgage-backed securities, BofA analysts including Chris Flanagan and Alexander Batchvarov wrote in a note. “Risk-off phase likely has started.”

The diminishing appetite for risk among investors should spill into wider investment-grade corporate spreads. That will likely bleed into higher-rated structured products, such as mortgage-backed securities from Fannie Mae and Freddie Mac. The bank remains neutral across the rest of the sector.

DeReza writes that the key indicators for this trend are the 10-year Treasury yields, the spread between two-year and 10-year Treasuries, rate volatility and investment-grade corporate spreads. 

He reports that the bank’s analysts also say that “U.S. stocks appear to have peaked compared with the Shanghai Composite Index, and mean reversion shows this may be the start of underperformance of American equities versus Chinese counterparts.”